On the heels of the United States Supreme Court’s recent holding in U.S. Airways v. McCutchen, where the Court held that a group health plan’s reimbursement rights are not automatically subject to equitable defenses, it appears that employers have been delivered yet another victory with respect to the enforcement of plan reimbursement rights.
On May 7, 2013, the Fifth Circuit Court of Appeals concluded in ACS Recovery Services, Inc. v. Griffin that a group health plan could enforce its reimbursement rights against the proceeds to be received by a trustee of a special needs trust established for the benefit of an injured participant. Although the attorney for the participant attempted to circumvent the plan’s reimbursement rights through an elaborate scheme of annuity purchases and ownership transfers, the court upheld the plan’s equitable lien against the annuity payments to be made to the trustee of the special needs trust. While this is not the first case in which a special needs trust was established to receive the settlement proceeds for the benefit of an injured participant, it is the first decision to confirm that the trustee of such trust is a proper defendant in a claim to enforce the plan’s reimbursement rights and, further, verifies that amounts deposited (or to be deposited) into such trust are not beyond the reach of the plan.
The holding in the Griffin case is welcome news for employers, but it will not likely protect employers from defective plan language (as the McCrutchen Court reminded us). Plan sponsors of self-insured group health plans should take this opportunity to review their reimbursement provisions to ensure that they are broad enough to allow enforcement against the participant as well as any other person who is in possession of, or has the right to receive, the settlement proceeds (or any annuity or similar contract purchased with the settlement proceeds).